To manage these risks, we have developed Risk Acceptance Criteria (RAC) for nine sectors which present heightened ESE risk. These define the level of ESE risk the bank is prepared to accept. The ESE Risk Framework applies to all legal entities within NatWest Group for the onboarding of non-personal customers (including, but not limited to, for the purposes of providing lending or loan underwriting services). Customers are assessed at onboarding and during the lifecycle of their relationship. Some of the activities which we prohibit include: provision of sexual entertainment venues, the manufacture, sale, trade, servicing or stockpiling of Highly Controversial Weapons, establishing new coal relationships and customers using harmful child labour, forced labour, modern slavery or human trafficking.
We also have an ESE risk concerns process which seeks to ensure that ESE risk is identified and managed for customers and transactions in sectors which are not covered by RAC, or where there may be multiple issues or complexities. Examples might include major or sustained environmental, human rights, modern slavery issues in sectors such as agriculture and food, chemicals, tobacco, pharmaceuticals and waste management, or companies associated with controversial projects.
All customers who fall into the ‘restricted’ ESE risk category (see ESE risk framework chart below) are subject to enhanced due diligence. This includes ensuring that companies have relevant policies and procedures to manage ESE risks and the capacity to manage these risks through good governance and control. It also assesses the companies’ external ESE track record. All restricted customer relationships are approved by a business segment or legal entity accountable executive and where material, may be escalated to the Group Reputational Risk Committee. The Group Reputational Risk Committee may review the appropriateness of transaction, customer or product specific cases, or specific matters which could have bank-wide reputational risk implications.
ESE Risk Framework oversight and effectiveness is provided by the Risk Function and reported annually to the Group Reputational Risk Committee.
